SEC Says Private Equity Getting Better At Fee Disclosure, But There’s “Room for Improvement”

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A high-ranking SEC official on Wednesday said that private equity firms are getting better at disclosing fees and other investment expenses to their limited partners, according to a Wall Street Journal report.

But Marc Wyatt, director of the SEC’s Office of Compliance, also said there was “room for improvement”.

From the Wall Street Journal:

Marc Wyatt, the acting director of the SEC’s Office of Compliance, Inspections and Examinations, said private-equity firms and their investors are “more focused” on fees and expenses, and that has prompted the industry to review and often change practices regulators have highlighted as questionable.

“This is a positive change,” Mr. Wyatt said. He added that there is “room for improvement” in how firms allocate expenses and manage co-investments, in which fund investors such as pension funds and sovereign-wealth funds directly participate in certain deals. He also called out real-estate funds, which sometimes offer property management and other services for an additional fee.

[…]

Mr. Wyatt said firms are providing more complete information to investors and, in some cases, eliminating fees that the agency has questioned. Specifically, he said the private-equity practice of pocketing extra fees when selling or taking public the companies they own seems to be falling out of favor.

Mr. Wyatt also said firms are better disclosing how they collect commissions for helping the companies they control get goods and services at a discount. The SEC had expressed concern that firms weren’t providing investors enough information about the fees they receive for steering companies into these group-purchasing programs.

The comments were made during the Private Fund Compliance Forum 2015, held in New York on Wednesday.

 

Photo by Securities and Exchange Commission via Flickr CC License

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